(1) Diet passes refueling legislation to extend activities for one
year

NIKKEI (Page 2) (Abridged slightly)
December 13, 2008

A bill extending the refueling mission in the Indian Ocean was
enacted on Dec. 12 after re-adopted in the House of Representatives
plenary session by a two-thirds majority vote from the Liberal
Democratic Party and New Komeito. The legislation is designed to
extend the Maritime Self-Defense Force's refueling and water-supply
activities, scheduled to expire on Jan. 15, for another one year.
Defining the refueling operation as the country's "minimum
requirement" for its contribution to the war on terrorism, the
government aimed at the law's early enactment, but Diet
deliberations exposed a number of future challenges.

The Lower House's re-adoption of the bill followed the legislation's
failure to clear the opposition-controlled House of Councillors in
the morning. In the wake of the enactment, Prime Minister Taro Aso
released a statement that read: "The war on terror is an effort that
Japan, as well, must deal with. Japan will continue to assume its
responsibility in the international community."

Following the enactment, the government intends to continue proving
fuel and water to naval vessels of eight countries, including the
United States and Pakistan. Since 2001, Japan has provided fuel 859
times, totaling some 500,000 kiloliters of oil. The frequency of
refueling and the volume provided to those countries, including the
United States, are on the decline.

TOKYO 00003388 002 OF 007

A senior Defense Ministry official commented: "The refueling mission
is at a crossroads. What Japan should do next as part of its
international contribution continues to be a challenge."

The incoming Obama administration advocates a shift from Iraq to
Afghanistan. It may press Japan even harder to dispatch SDF troops
to Afghanistan. The government has decided to withdraw the Air
Self-Defense Force from Iraq before year's end. Even so, it seems
difficult to dispatch the SDF on a new overseas mission with the
Diet. About sending troops to Afghanistan, Defense Minister Yasukazu
Hamada simply said to the press corps: "The refueling law has just
cleared the Diet, so the matter is still a clean slate situation. It
needs earnest discussion."

(2) Defense minister issues ASDF Iraq withdrawal order

TOKYO SHIMBUN (Page 1) (Full)
December 13, 2008

Defense Minister Yasukazu Hamada issued on Dec. 12 an order to the
Air Self-Force to wind up its airlift operations in Iraq under the
Iraq Special Measures Law. Some 210 ASDF personnel and three C-130
cargo planes will return home before year's end, putting an end to
the five years of the Ground and Air Self-Defenses' missions in Iraq
that started in January 2004.

The ASDF has been stationed in Iraq. At its early stage, the ASDF
airlifted GSDF troops. After the GSDF withdrew from Iraq in July
2006, the ASDF shifted its weight to the U.S. military and expand
its airlift mission to cover Iraq's capital of Bagdad, operating
four regular weekly flights.

The ASDF has made 821 flights to airlift 46,500 persons, including
2,800 UN workers, and 673 tons of supplies. The ASDF is also
believed to have airlifted over 30,000 U.S. troops. In April, the
Nagoya High Court ruled lifting armed U.S. troops to Baghdad
unconstitutional. A senior ASDF officer said: "The question is why
this operation is necessary in overseas activities. A good cause is
necessary. Public support is essential."

(3) U.S. forces asked ASDF dispatched to Iraq to add regular flights
from Baghdad to Ali, proving that mission was to transport troops

TOKYO SHIMBUN (Page 27) (Full)
December 14, 2008

This newspaper has learned that the Air Self-Defense Force, which
has been carrying out operations in Iraq, was asked by the
multinational force that includes the United States to create new
regular flights by C-130 transport planes linking the capital city
of Baghdad to the southern part of Ali (formerly Tallil), and that
beginning this year, the aircraft was making one flight a week
there.

Both locations are main strategic points for U.S. forces stationed
in Iraq. According to an ASDF crewmember, many armed U.S. soldiers
were ferried between the two bases. This underscores the situation
of ASDF aircraft being under the control of the U.S. forces and
bearing the responsibility for transporting some U.S. troops.

Since the Ground Self-Defense Force withdrew from Iraq at the end of
July in 2006, the ASDF has been carrying out four or five regular

TOKYO 00003388 003 OF 007

flights a week from Kuwait by three routes: the Ali flight, Baghdad
flight, and the Erbil flight via Baghdad. A senior ASDF officer
clarified the situation: "Even when flights were started to Baghdad,
we flew irregularly between Ali and Baghdad, but (starting in 2007,)
the flights regularized with the increase in U.S. troops."

Flights other than those to Erbil were "all for the multinational
force," according to a senior Self-Defense Forces officer, and the
ASDF planes were called "taxis" by the U.S. forces. The same ASDF
crewmember pointed out, "The ASDF plane were used by the U.S.
military as it wished; we were only pieces on the board."

The ASDF started transport flights to Iraq in March 2004, carrying
out 821 flights altogether and transporting 46,500 personnel and 673
tons of cargo. Among the personnel transported were approximately
2,800 United Nations staff, and subtracting the SDF personnel
transported, the remaining 30,000 personnel seems to have been U.S.
troops.

The Nagoya District Court in April ruled that the ASDF flights
transporting armed U.S. troops to combat-torn Baghdad was
unconstitutional.

A summit of Japanese Prime Minister Taro Aso, Chinese Premier Wen
Jiabao and Republic of Korea (ROK) President Lee Myung Bak took
place for the first time on Dec. 13 at the Kyushu National Museum in
Dazaifu, Fukuoka Prefecture. The three leaders agreed that the three
countries would closely cooperate in dealing with the global
financial crisis and North Korean issues. They also agreed to hold a
summit annually, holding it next year in China and the year next in
the ROK.

After the summit, the three leaders signed a joint statement on a
trilateral partnership advocating future-oriented comprehensive
cooperation. In addition, they announced an action plan, including
trilateral cooperation in wide-ranging areas such as politics, the
economy and environmental protection. They also agreed to cooperate
on disaster prevention.

Although a Japan-China-ROK summit has been held eight times since
1999 on the sidelines of international conferences, this was the
first formal summit of leaders of the three countries. Aso stated in
a joint press conference:

"It is the first time in history for the leaders of the three
countries to meet independently. Holding a trilateral summit
periodically in order to step up cooperation is epoch-making
progress contributing not only to Asia but also to the world."

The U.S.-originated financial crisis was high on the agenda at the
summit. The three leaders agreed to intensify regional cooperation
to stabilize the international financial market. Specifically, they
agreed to step up the Chen Mai Initiative, a network of bilateral
currency swap in the Asian region, as well as to increase funds of
the Asia Development Bank. They welcomed the expansion of
currency-swap limits by the central banks of the three countries.

TOKYO 00003388 004 OF 007

Aso, Wen and Lee confirmed the importance of making efforts to
increase domestic demands and growth dynamic in managing the
economy. In a joint statement on the international finance and
economy, stipulated their determination that the three countries
should play a more important role, since Asian countries are
expected to play a role as a world growth center in an effort to
deal with the current economic downturn.

The three leaders shared the view that it was regrettable that the
six-party talks had failed to codify a verification protocol on
North Korea's nuclear declaration. They confirmed the need for
boosting cooperation in the six-party talks. Aso sought the
cooperation of Wen and Lee in resolving the issue of North Korea's
abductions of Japanese nationals, as well as in promoting
Japan-China relations. Wen and Lee expressed their understanding.
They reportedly did not discuss the heavy oil aid to the North,
which the United States has decided to suspend.

Prime Minister Taro Aso met for about one hour with his Chinese
counterpart Wen Jiabao on Dec. 13 at the Kyushu National Museum in
Dazaifu, Fukuoka Prefecture. In the meeting, Aso lodged a protest
about two Chinese research ships having intruded into Japanese
waters near the Senkaku Islands, telling Wen:

"It is extremely regrettable. Such will adversely effect bilateral
relations, since the incident occurred at a time when our countries
have been making efforts to build a strategic reciprocal
relationship."

Referring to the Senkaku Islands, Wen said:

"Our country's position has been consistent that they are an
integral part of our country. We would like to resolve the issue
through talks so as not to negatively impact on favorable bilateral
relations."

Aso asked Wen to uncover the truth as quickly as possible about such
food safety issues as the poisoned Chinese-made frozen dumplings.
Wen just said: "We want to maintain communication with the Japanese
side and cooperation in the future as well."

Regarding response to the global financial crisis, Aso and Wen
shared the view that it would be important for Japan, China and
South Korea, while boosting domestic demands, to cooperate in order
to overcome the financial crisis.

Aso said that it was regrettable that the six-party talks on North
Korea's nuclear ambitions ended without producing any progress. Aso
sought cooperation from China, chair of the six-party talks, f on
the issue of Japanese nationals abducted by the North.

(6) Interview with Democratic Party of Japan (DPJ) Vice President
Okada: Creating a foothold with the new U.S. administration

ASAHI (Page 4) (Full)

TOKYO 00003388 005 OF 007

December 13, 2008

DPJ Vice President Katsuya Okada returned to Japan after a visit to
the United States in which he met over thirty persons in political
and business circles. His aim in traveling to the U.S. this time was
to prepare for a government change in Japan after the next Lower
House election by laying down a strategy for rebuilding Japan-U.S.
relations with the incoming Obama administration.

Interviewed in New York by Hisanori (?) Arima

-- What was your motive for visiting the U.S.?

"This was the first step in building a relationship with the Obama
administration and the U.S. Democratic Party to prepare for when
there is a change of government in Japan and (the DPJ) is the party
in power."

-- You met with think-tank researchers and others from the
Democratic Party in Washington?

"Although I could not meet anyone from the transition team of the
new administration, I felt the high expectations toward Mr. Obama.
At the same time, there was a fairly strong perception that Japan
had supported the Republican administration. I transmitted that many
Japanese were happy from the bottom of their hearts about the
launching of the Obama administration."

-- The DPJ has been against continuing the refueling mission in the
Indian Ocean. Were you asked about what Japan would do to assist
Afghanistan?

"I proposed that Japan might be able to play a mediating role in
bringing about conciliation (with the Taliban). Since Japan is not
dispatching any troops, it could contribute in that way."

-- Is Japan's DPJ giving any consideration to the Green New Deal
initiative that Mr. Obama is promoting?

"A number of us have discussed giving consideration based on linkage
between the economic crisis and the global warming problem. I have
said: 'This is a proper approach. Japan, too, has carrying out many
public works projects but without effect.' So for Japan, too, it is
of course essential."

-- How do you plan to build ties to the Obama administration?

"During the Bush-Koizumi era, the Japan-U.S. relationship relied on
a very small number of Japan experts. There is a risk involved if
exchanges are not broad in scope. I first would build a stable
foothold by establishing ties with aides of persons playing
important roles in the Obama administration. The party must
accomplish this goal."

The government and the ruling parties decided yesterday to withdraw
a bill amending the Antimonopoly Law now on the Diet agenda, instead

TOKYO 00003388 006 OF 007

of carrying it over to the next Diet session. The decision stems
from the judgment that the bill, which including such key measures
as an increase in surcharge payments, will unlikely be enacted in
the next ordinary Diet session since opposition parties are against
it. The government will rewrite some parts and submit a new bill to
the Diet possibly next spring.

The current bill proposes surcharges be raised 1.5 fold over the
current levels on companies responsible for bid-rigging arrangements
or forming cartels. It also calls for upgrading a system to reduce
or exempt surcharge payments for self-whistle blowers. No progress
has been made in negotiations on revising the draft amendment
between the ruling camp and the Democratic Party of Japan, which has
labeled as insufficient the measures proposed in the amendment to
reform the current umpire system under which the Fair Trade
Commission judges the appeals by companies against its punishment on
them. Deliberations on the bill have been carried over from the
ordinary Diet session this year.

The introduction of the hikes in administrative surcharges is
expected to be "delayed by about one year from the initially
envisioned spring of next year," according to an executive ruling
party member.

Prime Minister Taro Aso announced at a press conference at the Prime
Minister's Office yesterday a plan to draw up emergency measures to
deal with the worsening job market and the recent economic turndown.
The package will include a measure to create an economic emergency
fund worth 1 trillion yen that the government can use on its
discretion when the economic situation unexpectedly deteriorates.
The total value of projects proposed in this emergency plan will be
approximately 23 trillion yen, including those already in the
earlier-announced additional economic package. Even while setting
forth proactive fiscal disbursements, Aso expressed an intention to
hike the consumption tax in fiscal 2011 if the economy turns around
by that time.

The new package, called "an emergency plan to protect people's
livelihoods," includes measures to supplement the additional package
(worth about 27 trillion yen) announced in late October to deal with
the ongoing financial crisis. If duplicated projects are excluded,
the total value of the projects in both packages will be about 44
trillion yen.

The new package features measures to improve the aggravating job
market and to ease concerns growing among companies about procuring
funds. Aso said in the press conference: "I will make utmost efforts
so that Japan will be able to emerge from the recession the earliest
among the industrialized countries." The government will map out
specific measures later this year.

The necessary revenue sources will be raised from the second
supplementary budget for this fiscal year and the initial budget for
next fiscal year. The government envisions the following projects
that are viable even before the budget bill is enacted: (1)

Aso indicated plans to use reserves in special accounts to cover a
shortfall of fiscal sources. Keeping expected drops in corporate tax
and other revenues under the current business recession, Aso hinted
at issuing deficit-covering bonds, remarking: "We must consider
various options from now."

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